RBI releases the Financial Stability Report, June 2025

**Executive Summary** The Reserve Bank released the June 2025 issue of the Financial Stability Report (FSR) on June 30, 2025. The FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability. **Key Points / Main Content** *Global Economy and Financial Markets* * Elevated economic and trade policy uncertainties are testing the resilience of the global economy and financial system. * Financial markets remain volatile, especially core government bond markets, due to shifting policy and geopolitical environments. Existing vulnerabilities, such as high public debt and asset valuations, could amplify shocks. *Indian Economy* * The Indian economy remains a key driver of global growth, supported by sound macroeconomic fundamentals and prudent policies, despite a challenging global backdrop. * The domestic financial system exhibits resilience, with healthy balance sheets of banks and non-banks and strength of the corporate balance sheets. Financial conditions have eased through supportive monetary policy and low volatility. *Financial Institutions* * Scheduled commercial banks (SCBs) demonstrate soundness and resilience, bolstered by robust capital buffers, low non-performing loans, and strong earnings. * Macro stress tests confirm that most SCBs possess adequate capital buffers relative to the regulatory minimum even under stress. Tests also validate the resilience of mutual funds and clearing corporations. * Non-banking financial companies (NBFCs) remain healthy with sizable capital buffers, robust earnings, and improving asset quality. * The insurance sector's consolidated solvency ratio remains above the minimum threshold limit. **Impact Analysis** **SCBs, Mutual Funds, and Clearing Corporations** * *Impact:* The results of the stress tests need to be considered when making decisions to ensure adequate capital buffers under adverse conditions. * *Action Required:* Review current capital adequacy and revise strategies if needed to maintain resilience. **NBFCs** * *Impact:* The information confirms the need to maintain strong capital buffers, earnings, and asset quality. * *Action Required:* Maintain current standards and continue to monitor capital, earnings, and asset quality closely. **Insurance Sector** * *Impact:* Confirmation of the sector's solvency ratio being above the minimum threshold limit. * *Action Required:* Continue to monitor solvency and ensure it remains above the minimum threshold.

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